Investment returns push Covéa into profit after underwriting loss

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Covéa delivered an underwriting loss of £22.3m in 2019 compared to a profit of £1.8m the year before, with the insurer hit by high levels of motor claims inflation and flat market premiums along with a lower level of reserve releases.

As recently as 2017 it made £12.4m in underwriting profit.

Profit after tax for the year to 31 December 2019 more than doubled to £3.7m from £1.5m in 2018. This was driven by an improvement in investment returns where a profit of £25.4m replaced a loss of £3.4m in 2018.

The figures, released in a filing a Companies House, showed a 1.9% rise in gross written premium to £779.6m as the combined operating ratio worsened to 103.9% from 99.7% in the previous 12 months.

The breakdown of the numbers showed the personal lines motor account made up the bulk of the underwriting loss.

The division had a £27.4m deficit while GWP slipped fractionally to £382.1m (2018: £389.1m) and the COR deteriorated from 102.8% to 109.7%.

Covéa described the result as “very disappointing” and listed higher levels of claims inflation, higher repair costs, theft claims frequency and the Ogden rate decision among the factors.

Meanwhile personal lines home bounced back to underwriting profit, of £5.2m, from a loss of £5.3m in the prior period. GWP rose 3.4% to £121.4m as the COR improved to 94.1% (2018: 106.1%).

Commercial lines was also profitable but significantly down year on year.

Premiums were up 4.5% at £216.9m.

However the COR worsened from 89.7% to 98.8% as the underwriting profit slumped from £14.6m to £1.9m.

The business was hit by higher than anticipated attritional claims on the property account and a higher number of large claims along with lower reserves, Covéa said.

The protection unit – for accident, pet and income protection insurance – had 15.9% of premium growth.

This came despite Covéa deciding to pull out of underwriting protection business in the Republic of Ireland due to Brexit. Premiums from the country dropped from £4.2m in 2018 to £860,000 during the year.

The transfer in of a book of income protection policies from an existing partner was the main reason for the growth, Covéa explained.

However, overall the COR worsened to 104.4% from 99.5% and the underwriting performance slipped from a profit of £209,000 in 2018 to a loss of £1.9m.

According to the provider, the result was “adversely impacted by higher than expected claims on a range of short-term income protection products launched in 2018”.

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